UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported): May 19, 2005
Kirby
Corporation
(Exact
name of registrant as specified in its charter)
|
Nevada |
1-7615 |
74-1884980 |
|
(State
or other jurisdiction of incorporation
or organization) |
(Commission
File Number) |
(I.R.S.
Employer Identification
No.) |
|
55
Waugh Drive, Suite 1000 |
77007 | |
|
Houston,
Texas |
(Zip
Code) | |
|
(Address
of principal executive offices) |
||
| Registrant’s telephone number, including area code: | ||
| (713) 435-1000 |
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written communications pursuant to Rule 425 under
the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item
7.01. |
Regulation
FD Disclosure. |
On May
19, 2005, Kirby Corporation’s senior management will make a presentation to
investors and analysts from 2:00 p.m. (Eastern time) until approximately 5:20
p.m. (Eastern time) in New York City. A live webcast of the presentation will be
available to the public and replays will be available afterward. The webcast can
be accessed by visiting Kirby’s Web site at http://www.kirbycorp.com/ or by
following the link below and selecting the streaming audio option:
http://invite.mshow.com/findshow.aspx?usertype=0&cobrand=100&shownumber=235506
Reference:
Kirby Corporation Analyst Day, show number 235506
A copy of
the slide presentation that will be used by Kirby at the event, substantially in
the form intended to be used, is included as Exhibit 99.1 to this report and is
also posted on Kirby’s Web site at http://kirbycorp.com/ in the
Investor Relations section under Investor and Analyst Meeting, May 19, 2005.
The
program will also include presentations by the Waterways Council, Inc. on the
U.S. inland waterway system infrastructure, by Chemical Market Associates, Inc.
(CMAI) on the outlook for the petrochemical industry and by Purvin & Gertz,
Inc. on the refined products market. As a convenience to interested persons, and
without any express or implied endorsement by Kirby, copies of prepared
materials for those three presentations are available on Kirby’s Web site in the
Investor Relations section under Investor and Analyst Meeting, May 19, 2005.
Waterways Council, Inc., CMAI and Purvin & Gertz, Inc. is each solely
responsible for its own presentation. The information, analysis and opinions
contained in those three presentations are those of the presenting organizations
alone. Kirby has no responsibility for the content of any of those
presentations.
|
Item
9.01. |
Financial
Statements and Exhibits. |
|
(c) |
Exhibits |
|
99.1 |
Kirby
Corporation slide presentation dated May 19,
2005 |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
| KIRBY CORPORATION | ||
| (Registrant) | ||
|
By: |
/s/ G. STEPHEN HOLCOMB | |
|
G. Stephen Holcomb | ||
|
Vice
President, Investor Relations | ||
Dated:
May 19, 2005
EXHIBIT
INDEX
|
Exhibit
99.1 |
Kirby
Corporation slide presentation dated May 19,
2005 |
|
2:00 –
2:05 |
Welcome
and Introductions |
|
2:05 –
2:30 |
U.S.
Inland Waterways |
|
2:30 –
3:00 |
Kirby
Overview |
|
3:00 –
3:15 |
Kirby
Inland Marine
· Kirby and Industry Fleet
Profile |
|
3:15 –
3:30 |
Break
15 minutes |
|
3:30 –
3:50 |
Kirby
Engine Systems Overview |
|
3:50 –
4:35 |
Outlook
for the Petrochemical Industry
· Chemical Market Associates,
Inc. |
|
4:35 –
5:20 |
Refined
Products Supply & Demand Drivers
· Purvin & Gertz,
Inc. |
|
5:20 –
5:25 |
Closing
Remarks |
Agenda
Kirby
Analyst/Investor Meeting
|
2:00 –
2:05 |
Welcome
and Introductions |
|
2:05 –
2:30 |
U.S.
Inland Waterways |
|
2:30 –
3:00 |
Kirby
Overview |
|
3:00 –
3:15 |
Kirby
Inland Marine
· Kirby and Industry Fleet
Profile |
|
3:15 –
3:30 |
Break
15 minutes |
|
3:30 –
3:50 |
Kirby
Engine Systems Overview |
|
3:50 –
4:35 |
Outlook
for the Petrochemical Industry
· Chemical Market Associates,
Inc. |
|
4:35 –
5:20 |
Refined
Products Supply & Demand Drivers
· Purvin & Gertz,
Inc. |
|
5:20 –
5:25 |
Closing
Remarks |
Agenda
Kirby
Analyst/Investor Meeting
The
State of the Waterways
Kirby Corporation
Analysts’ Briefing
Berdon
Lawrence, Chairman
Kirby
Corporation
John
Doyle, Vice President
Waterways Council,
Inc. &
Special Counsel,
Jones Walker LLP
The
waterways are an
American success story:
American success story:
| • | They helped make America great |
| • | They
create and maintain good agricultural and manufacturing jobs |
| • | But,
our leaders in Washington began to take them for granted |
| • | So,
industry and agriculture organized to defend and improve the waterways |
| • | We have been successful so far |
| • | The outlook is positive |
Canals
Dams
Locks
The
System
Rivers
-Nearly
12,000 Miles 9 ft & Over
-192
Lock Sites / 238 Chambers
-About
2/3rds Cost of Rail and
1/10
Cost of Truck
How far one
gallon of fuel
moves one
ton of freight, average by mode…
Truck:
70 miles
Rail:
420 miles
Barge:
530 miles
0
100
200
300
400
500
600
Miles
Barge
transportation enjoys similar efficiencies in air
emissions per ton mile.
emissions per ton mile.
We Conserve Fuel
& Reduce
Air Emissions
Air Emissions
We
offer a solution to Congestion:
The
waterways
serve key future
transportation corridors
serve key future
transportation corridors
The waterways serve
many
traffic growth
corridors.
America’s
Waterways Advantage
| • |
American farmers and industries compete in a tough global marketplace |
| – | If you
get the goods to the customer cheaper, you get the sale |
| – | Efficient,
low cost waterways transportation reduces total costs and allows us to compete |
| • | The
Result: American exports win and vital, high paying jobs stay here! |
Over
$10
Billion
Billion
$2 -
10
Billion
Billion
$1 -
2
Billion
Billion
$100 Million
to
$1
Billion
Lock
Construction
or
Rehabilitation
Under
$100
Million
Based on
data developed by TVA and USACE.
Value
of Inland and Intracoastal
Waterborne Cargo
Waterborne Cargo
by
State of Origin
| • | Over
$112 billion in cargo |
| • | Shipped from
31 states |
| • | At
average savings of $11 / ton over competing modes |
Waterways Role in
Nation’s
Economic Prosperity
Economic Prosperity
| • | Grain Exports |
| – | 90 million tons annually |
| – | 70%
of soybean and 62% of corn exports move by barge |
Waterways Role in
Nation’s
Economic Prosperity
Economic Prosperity
| • | Coal for power plants |
| – | 227 million tons annually – inland, Lakes, coastal |
| – | 20 % of utility coal supplied by waterway |
Waterways Role in
Nation’s
Economic Prosperity
Economic Prosperity
| • |
Petrochemicals & Petroleum Products |
| – | 350
million tons annually between domestic points |
We
are having success…
…because we have a good story to tell
…because we have a good story to tell
| • |
Keeping our industries and farmers competitive in a very tough global marketplace preserves U.S. jobs |
| • | Reduces congestion on our highways |
This is an easy
story to understand, but
somebody has to tell it to the Washington
lawmakers.
somebody has to tell it to the Washington
lawmakers.
Traditionally, the
industry did not take a proactive
role in telling
this story. Over time, this resulted in:
The
90’s
| • |
Declining support in the Administration and Congress |
| • | Corps spending on waterways diverted elsewhere |
| • | Trust fund balance starts to rise |
| • | “Environmentalists” mount attack on the Corps |
| • | Media
& editorial campaigns against the Corps and water resources development |
Waterways
Work! was formed
in 2001 to counter
negative
publicity about the
industry
In
2003, Waterways Work
merged with DINAMO,
the
Association for the
Ohio
Valley, and formed
the
Waterways Council,
Inc.
The Waterways
Council, Inc.:
| • | Professional staff based in Washington, DC |
| • | Media relations team |
| • | Annual budget now over $1 million |
| • | Active member involvement |
| • | Dedicated lobbying team – Jones Walker/Livingston Group |
The waterway
community response:
Who are
WCI
Members?
Members?
| • | All
waterway business interests: |
| – | Carriers |
| – | Shippers |
| – | Waterways
Service Providers |
| – | Port
Authorities & Governmental Entities |
| – | Regional Associations |
| • | Geographically Diverse |
| • | All
major commodity groups: |
| – | Oil,
chemical and petrochemical |
| – | Grain |
| – | Coal |
| – | Building Materials |
| – | Steel, Aluminum and Ore |
| – | Containers |
The
Objectives:
| • | Get
the President to propose adequate budgets |
| • | Get
Congress to pass laws that authorize projects and appropriate the money needed each year to build and maintain them |
| • | Ensure
the Corps of Engineers actually spends the money as intended by Congress |
New
Construction
Major
Rehabilitation
Olmsted
Inner
Harbor
Marmet
McAlpine
Kentucky
L&D
11 Rehab
L&D
19 Rehab
L&D
24 Rehab
Lower Mon
2-4
Myers
Chickamauga
Active new
lock
construction and major
rehabilitation program
underway in FY ‘05:
construction and major
rehabilitation program
underway in FY ‘05:
| • | 8 new or replacement |
locks (receiving
IWTF funds)
| • | 3 major rehabs |
| • | $332 million in funding |
New
Construction and Modernization:
Major Navigation Projects Underway
Major Navigation Projects Underway
Based on FY
2005 Appropriations
|
Year |
Estimated
Outlays |
Tax
Revenues |
Interest Earnings |
Year-End Balances |
|
($Millions) | ||||
|
1990 |
117.3 |
62.8 |
26.2 |
292.8 |
|
1991 |
148.6 |
60.5 |
21.2 |
225.9 |
|
1992 |
122.7 |
69.9 |
13.7 |
186.7 |
|
1993 |
74.5 |
78.6 |
7.5 |
198.3 |
|
1994 |
75.7 |
88.4 |
9.3 |
220.2 |
|
1995 |
94.8 |
103.4 |
13.3 |
242.1 |
|
1996 |
85.5 |
108.4 |
15.6 |
280.6 |
|
1997 |
89.5 |
96.4 |
17.0 |
304.6 |
|
1998 |
76.9 |
91.1 |
18.3 |
337.1 |
|
1999 |
88.2 |
104.4 |
16.0 |
369.2 |
|
2000 |
102.4 |
99.6 |
20.0 |
387.8 |
|
2001 |
120.3 |
102.6 |
20.9 |
390.9 |
|
2002 |
104.5 |
95.3 |
12.4 |
394.1 |
|
2003 |
101.6 |
89.5 |
9.5 |
391.6 |
|
2004 |
117.3 |
90.8 |
6.9 |
372.0 |
|
*2005 |
146.0 |
92.0 |
7.0 |
325.0 |
Inland Waterways
Trust Fund
Trust Fund
Balances
Money from 20 cent
per gallon fuel tax. This is matched with an
equal sum from the
Treasury. Actual spending is double this amount.
50
70
90
110
130
150
170
190
210
96
97
98
99
OO
O1
O2
O3
O4
O5
O6
Fiscal
Year
$184
Mil.
in Bush
Budget.
Appropriations
bill
pending.
Waterways Work
/
Waterways
Council
Formed
Trust Fund
Spending:
New Construction and Major Rehab
New Construction and Major Rehab
Millions of
dollars
from trust
fund.
Matched
with
general
revenues.
Recent Trust Fund
Spending
|
FY
2002 Enacted |
FY
2003 Enacted |
FY
2004 Enacted |
FY
2005 Enacted |
FY
2006 Request |
% Difference (05 vs. 02) |
% Difference (06 vs. 02) | |
|
Construction General |
1,712 |
1,745 |
1,731 |
1,782 |
1,637 |
4.1 |
(-4.4) |
|
Inland Waterways Trust Fund |
189 |
253 |
270 |
332 |
368 |
75.7 |
94.7 |
|
Corps Civil Works Total |
4,650 |
4,699 |
4,563 |
4,668 |
4,513 |
0.4 |
(-2.9) |
Inland
Waterways Trust Fund
Appropriations Comparison
Appropriations Comparison
($ in
millions)
Goals for Fiscal
Year 2006
Appropriations:
Appropriations:
| • | At
least $300 million ($150 million from the Inland Waterways Trust Fund) for Building Priority Projects |
| • | An
additional $100 million above the President’s budget for inland navigation Operations and Maintenance priority needs |
0
100
200
300
400
500
600
1977
1980
1983
1986
1989
1992
1995
1998
2001
Current $
and 1996 Constant $,
Fuel-Taxed Waterways Only
Fuel-Taxed Waterways Only
2004
Real
O&M funding remains flat even
as project portfolio grows and
ages…
as project portfolio grows and
ages…
Current
$
Constant
$
$
Operations &
Maintenance (O&M)
funding is our next major challenge
funding is our next major challenge
The O&M
Challenge
| • | Intensified Focus in 2005 |
| • | System-Wide Examination |
| • | Joint Industry/Corps Initiative |
| • | Maintain and Improve System Reliability |
| • | Secure
Adequate Resources and Invest to Maximize Results |
| – | Reduce Risk and Increase Reliability |
Industry/Corps
O&M Workshops in 2005
| • | Conducted |
| – | January Cincinnati, OH Ohio River System |
| – | January St. Louis, MO Upper Miss./Illinois |
| – | February Tampa, FL Integration |
| – | April New Orleans, LA Gulf Intracoastal |
| • | Being Planned |
| – | TBD TBD Lower Miss. & Tribs. |
| – | TBD TBD Columbia/Snake |
Industry/Corps
O&M Workshops
| • |
Identify most pressing problems from perspective of Corps and industry |
| • |
Allocate resources to address most pressing needs |
| • | We are
committed to both short term and long term solutions to navigational issues |
Also Where We Are
Going…
| • |
Passage of Water Resources Development Act (WRDA) |
| – | Authorize
Lock Modernization on the Upper Mississippi and Illinois Rivers |
| – | Reasonable,
Non-Damaging “Corps
Reform” Provisions |
Kirby is a leader
in efforts to
maintain and
improve our
waterways
infrastructure.
| • | Kirby supports national efforts: |
| – | Berdon
Lawrence, Chair, Waterways Works/Waterways Council 2001- March, 2005 |
| – | Steve
Valerius, Incoming Chair, American Waterways Operators |
| – | Joe
Pyne, Chair, National
Waterways Foundation |
Kirby is a leader
in efforts to
maintain and
improve our
waterways
infrastructure.
| • | Kirby also supports regional efforts. Examples: |
| – | *Gulf Intracoastal Canal Association (GICA) |
| – | Midwest Area River Coalition (MARC 2000) |
| – | *Louisiana
Association of Waterways Operators and Shipyards (LAWS) |
| – | *Texas Waterway Operators Association (TWOA) |
| – | *Warrior Tombigbee Waterway Association |
*Kirby employee is
officer or director
Things are
getting better
…yet we still have
much work to do.
Some of the images
in this presentation are courtesy of the
U.S. Army Corps of
Engineers
|
2:00 –
2:05 |
Welcome
and Introductions |
|
2:05 –
2:30 |
U.S.
Inland Waterways |
|
2:30 –
3:00 |
Kirby
Overview |
|
3:00 –
3:15 |
Kirby
Inland Marine
· Kirby and Industry Fleet
Profile |
|
3:15 –
3:30 |
Break
15 minutes |
|
3:30 –
3:50 |
Kirby
Engine Systems Overview |
|
3:50 –
4:35 |
Outlook
for the Petrochemical Industry
· Chemical Market Associates,
Inc. |
|
4:35 –
5:20 |
Refined
Products Supply & Demand Drivers
· Purvin & Gertz,
Inc. |
|
5:20 –
5:25 |
Closing
Remarks |
Agenda
Kirby
Analyst/Investor Meeting
Kirby
Corporation
Putting
America’s Waterways to Work
NYSE:
KEX
May
2005
Statements
contained in this presentation with respect to the future are
forward-looking statements. These statements reflect management’s
reasonable judgement with respect to future events. Forward-looking
statements involve risks and uncertainties. Actual results could differ
materially from those anticipated as a result of various factors, including cyclical or other downturns in demand, significant pricing competition, unanticipated additions to industry capacity, changes in the Jones Act or in U.S. maritime policy and practice, fuel costs, interest rates, weather conditions and the timing, magnitude and the number of acquisitions made by Kirby. A list of additional risk factors can be found in Kirby’s annual report on Form 10-K for the year ended December 31, 2004, filed with the Securities and Exchange Commission.
forward-looking statements. These statements reflect management’s
reasonable judgement with respect to future events. Forward-looking
statements involve risks and uncertainties. Actual results could differ
materially from those anticipated as a result of various factors, including cyclical or other downturns in demand, significant pricing competition, unanticipated additions to industry capacity, changes in the Jones Act or in U.S. maritime policy and practice, fuel costs, interest rates, weather conditions and the timing, magnitude and the number of acquisitions made by Kirby. A list of additional risk factors can be found in Kirby’s annual report on Form 10-K for the year ended December 31, 2004, filed with the Securities and Exchange Commission.
Kirby
reports its financial results in accordance with generally accepted
financial principles (GAAP). However, Kirby believes that certain
Non-GAAP financial measures are useful in managing Kirby’s businesses and evaluating Kirby’s performance. This presentation contains two Non-GAAP financial measures, adjusted net earnings and EBITDA. Please see the Appendix for a reconciliation of GAAP to Non-GAAP financial measures.
financial principles (GAAP). However, Kirby believes that certain
Non-GAAP financial measures are useful in managing Kirby’s businesses and evaluating Kirby’s performance. This presentation contains two Non-GAAP financial measures, adjusted net earnings and EBITDA. Please see the Appendix for a reconciliation of GAAP to Non-GAAP financial measures.
Kirby
Forward Looking Statement
Marine
Transportation
87% of
2004 Revenue - $588.8 million
Largest
U.S. Inland Tank Barge Operator
Diesel
Engine Services
13% of
2004 Revenue - $86.5 million
Largest
Domestic EMD Diesel Services Company
Kirby...
Business Operations
Kirby
Facts
| • | Largest inland tank barge operator |
| • | Operates 878 barges and 239 towing vessels |
| • | Sustainable competitive advantages: |
| – | Lowest cost due to economies of scale |
| – | Best positioned for growth opportunities |
| – | “One Stop Shop” for customers |
| • |
70% of Kirby’s business is under contract, 30% spot market |
| • | Successful integration of 23 acquisitions |
17%
growth
rate from
1988-2004
rate from
1988-2004
Revenue...
Business Operations
1994-2001
adjusted to exclude goodwill amortization expense
2002
adjusted to exclude impairment charges of $12.5 million, net of taxes, or $.51
per share
See
Appendix for reconciliation of GAAP to Non-GAAP earnings per
share
12.4%
growth
rate from
1994 - 2004
rate from
1994 - 2004
Earnings Per
Share From Continuing Operations Before Adjustments
Guidance
Earnings
Per Share…
| • |
Record 1st quarter 2005 earnings of
$.52, 44% increase over 1st quarter 2004 earnings of $.36 |
| • |
Raised 2005 annual forecast to $2.45 - $2.55, 24% to 29% above 2004 |
| • |
1st quarter 2005 spot and contract
rates increased 4% to 5% |
| • |
2004 chemical volumes up 4% to 5%; 2005 chemical volumes expected to improve but at a slower rate |
| • |
Diesel engine business during 1st
quarter 2005 increased prices on both parts and labor |
Recent
Demands and Pricing Trends
| • | 70% Contract, 30% Spot |
| – | Reduces volatility and improves predictability |
| – | Allows
Kirby to service peak demand from
contract customers |
| – | Long-term approach to business |
| • |
Ideally would want higher spot exposure when spot rates were higher than contract rates |
| – | Short-term approach to business |
| – | More risk |
| – | Difficult to achieve |
Contract to
Spot Market Mix
| • | Why
has Kirby not benefited more from the problems that rail and trucks are having with their infrastructure? |
Issues
60,000 bbl.
two-barge tow is equivalent to:
Kirby’s
fleet capacity of 16.4 million bbls. equates
to 82,000 trucks, or 21,900 rail cars
to 82,000 trucks, or 21,900 rail cars
Rail
Cars
80
Trucks
300
Barges
Compete SuccessfullyWith
Rails and Trucks
St.
Paul
Sioux
City
Chicago
Pittsburgh
Charleston
St.
Marks
Tulsa
Brownsville
Corpus
Christi
Houston
New
Orleans
St.
Louis
Cincinnati
Mobile
Kirby
is one of the few operators
offering distribution
throughout
the
Mississippi River System and Gulf
Mississippi River System and Gulf
Intracoastal
Waterway
Waterway
12,000
miles of navigable waterways
linking America’s heartland to the world
linking America’s heartland to the world
Texas
and Louisiana account for 80% of the total U.S. production of chemicals and
petrochemicals
Putting
America’s Waterways to Work
Inland Waterway System
Inland Waterway System
One gallon
of fuel in a barge can move one ton of freight 522 miles, compared
to 403 miles by rail and only 80 miles for a truck.
to 403 miles by rail and only 80 miles for a truck.
Barge
Rail
Truck
Barges…
Efficient
Efficient
While
moving one ton of freight 1,000 miles:
| • | Smog is a major problem in most major cities |
| • | Oxides of nitrogen are the chemicals that produce smog |
Trains
produce 3.5 times as much oxides
of
nitrogen as barges
nitrogen as barges
Trucks
produce 19 times as much oxides
of
nitrogen as barges
nitrogen as barges
Barges…
Environmentally Friendly
Environmentally Friendly
| • |
Why has Kirby not benefited more from the problems that rail and trucks are having with their infrastructure? |
| • |
What has been the cost of security measures required by the Homeland Security Act? |
| • | What are the prospects for an acquisition this year? |
Issues
|
Shipper
Owned
Independent |
Tank Barges Operated |
Dry
Cargo Barges Operated |
|
Kirby
Corporation |
878 |
- |
|
American
Commercial Lines LLC |
379 |
2,861 |
|
Marathon
Ashland Petroleum |
167 |
- |
|
Ingram
Barge Company |
165 |
3,468 |
|
Canal
Barge Company, Inc. |
150 |
226 |
|
Florida
Marine |
103 |
- |
|
American
River Transportation Co |
84 |
1,892 |
|
Blessey
Enterprises |
83 |
- |
|
Higman
Barge Lines, Inc. |
77 |
- |
|
Cenac
Towing Company, Inc. |
69 |
- |
|
Magnolia
Marine Transport Co |
60 |
- |
|
PPG
Industries, Inc. |
59 |
- |
|
Martin
Midstream Partners |
55 |
- |
|
Southern
Towing Company |
53 |
- |
|
Settoon
Towing, LLC |
49 |
- |
|
LeBeouf
Brothers Towing Co |
43 |
- |
|
John
W. Stone Oil |
31 |
- |
|
Dupont |
30 |
- |
|
Olin
Corporation |
26 |
- |
|
Buffalo
Marine Service, Inc. |
22 |
- |
|
River
City Towing Services |
19 |
- |
|
Rhodia,
Inc. |
19 |
- |
|
Lyondell
Chemical Company |
17 |
- |
|
Shipper
Owned
Independent |
Tank
Barges Operated |
Dry
Cargo Barges Operated |
|
Dynegy
Midstream Services |
16 |
- |
|
Waxler
Towing Company, Inc. |
15 |
- |
|
Highland
Towing |
15 |
- |
|
ConocoPhillips
Company |
15 |
- |
|
Plaquemine
Towing Corp. |
13 |
- |
|
Houston
Marine Services, Inc. |
13 |
- |
|
Devall
Towing |
12 |
- |
|
Chem
Carriers, Inc. |
11 |
- |
|
Westlake/GA&O
Corporation |
10 |
- |
|
Merichem
Company |
8 |
- |
|
Grifco |
8 |
- |
|
Apex
Towing |
7 |
- |
|
Golding
Barge Lines, Inc. |
6 |
- |
|
Republic
of Texas |
6 |
- |
|
American
Milling |
5 |
17 |
|
Barge
Management, Inc. |
5 |
- |
|
Mon
River Towing, Inc. |
4 |
142 |
|
Reilly
Industries |
4 |
- |
|
Memphis
Barge Lines |
2 |
- |
|
Cytec
Industries |
2 |
- |
|
Jantran,
Inc. |
1 |
3 |
|
Other
dry cargo carriers |
- |
9,
670 |
|
TOTAL |
2,816 |
18,279 |
Sparks
Companies, March 2005
Kirby
Outpaces the Competition
Tank Barge
Owners By Number of Tank Barges
| • |
Why has Kirby not benefited more from the problems that rail and trucks are having with their infrastructure? |
| • |
What has been the cost of security measures required by the Homeland Security Act? |
| • | What are the prospects for an acquisition this year? |
| • | How is Osprey doing? |
Issues
Osprey
| • | Container on barge operation |
| – | Developing a new market |
| – | Challenge is to divert traffic from other modes and routes |
| – | Shorebased
infrastructure more important than
actual movement |
| • | Inland service shows great potential |
| – | Developing infrastructure |
| – | Building volume |
| – | Testing pricing |
| • | Coastal service using small ship struggling |
| – | Cost of vessel |
| – | Volume |
| • |
Significant long term potential but short term development will be slow and uneven |
| – | 5 to 10 year play |
Observations
About Market
| • | Bear Sterns Conference |
| – | Disconnect
between Wall Street’s perception and what transportation companies are seeing |
| • | Kirby’s current business conditions |
| – | Saw no February/March soft patch |
| – | Remain very busy |
| – | Customers
are not telling us they are worried about their volumes |
| • | Best fundamentals Kirby has seen in 25 years |
Financial
Highlights
For Three
Months Ended March 31
12.7%
15.2%
Operating
Margins
11.2%
growth
rate from
1994 - 2004
rate from
1994 - 2004
See
Appendix for reconciliation of GAAP net earnings to Non-GAAP
EBITDA
EBITDA Per
Share Growth
*
Excluding acquisitions
Cash
Flows
31.1%
Debt /
Capitalization
Balance
Sheet
| • | Investment grade public debt |
| – | Standard & Poor’s – BBB |
| – | Moody’s – Baa3 |
| • | 10-year unsecured Private Placement due 2013 |
| – | $200 million outstanding |
| – | Floating rate of LIBOR +1.2% |
| – | Callable at par after one year without penalty |
| – | No required principal payments until maturity |
| • |
$150 Million Revolving Credit Facility – December 2003 |
| – | Maturity extended three years to December 2007 |
| – | Accordion
feature added to allow maximum amount to increase to $225 million without amendment |
Financial
Strength
| • | Approximately $200 million of outstanding debt |
| – | Floating rate private placement maturing 2013 |
| – | $150
million bank revolving credit maturing December 2007 (expandable to $225 million) |
| • |
$150 million hedged against interest rate movements |
| – | $50 million hedged until May 2009 |
| – | $100 million hedged until February 2013 |
| • | Total cost of debt in Q1 2005 averaged 6.0% |
Interest
Rate Risk
| • |
Completed first annual assessment of internal controls over financial reporting |
| – | No material weaknesses |
| – | No significant deficiencies |
| – | Clean opinion from KPMG |
| • | Total cost for 2004 compliance - $1 million plus |
| • | 2005 Compliance |
| – | Minimal effort to update controls |
| – | Testing of controls |
| • | PCAOB
and SEC rule changes expected to reduce projected time and cost |
Section
404
Sarbanes-Oxley
Act of 2002
| • | Covers only vessel employees |
| • |
Kirby’s policy is to fund 100% of Accumulated Benefit Obligation (ABO) |
| – | Plan assets: $76.4 million at 12/31/04 |
| – | ABO: $75.6 million at 12/31/04 |
| • | Pension expense |
| – | 2003: $4.0 million |
| – | 2004: $5.2 million |
| – | 2005 Projected: $5.2 million |
| • | Contribution |
| – | 2003: $5.6 million |
| – | 2004: $4.6 million |
| – | 2005 Projected: $4 - $8 million |
Defined
Benefit Pension Plan
|
2:00 –
2:05 |
Welcome
and Introductions |
|
2:05 –
2:30 |
U.S.
Inland Waterways |
|
2:30 –
3:00 |
Kirby
Overview |
|
3:00 –
3:15 |
Kirby
Inland Marine
· Kirby and Industry Fleet
Profile |
|
3:15 –
3:30 |
Break
15 minutes |
|
3:30 –
3:50 |
Kirby
Engine Systems Overview |
|
3:50 –
4:35 |
Outlook
for the Petrochemical Industry
· Chemical Market Associates,
Inc. |
|
4:35 –
5:20 |
Refined
Products Supply & Demand Drivers
· Purvin & Gertz,
Inc. |
|
5:20 –
5:25 |
Closing
Remarks |
Agenda
Kirby
Analyst/Investor Meeting
Kirby Inland
Marine
May
2005
| • | Industry Fleet Profile |
| • | Logistics Management |
| • | Marine Workforce |
Focus
Industry
Fleet Profile
Refined
Products
10%
Black
Oil
20%
Agricultural
Chemicals
5%
Petrochemicals
65%
Market
Segments
878
Active Tank Barges
Petrochemical
Refined
Products
Refined
Products
High
Capacity
pumps –
Specialty coated
tanks
pumps –
Specialty coated
tanks
694
105
63
13
3
Pressure
Pressurized
tanks
tanks
Black
Oil
Self-contained
heating systems
heating systems
Anhydrous
Ammonia
Ammonia
Refrigeration
tanks
tanks
Specialty
Stainless
steel
tanks
tanks
High Tech
and Diverse Fleet
|
Shipper
Owned
Independent |
Tank
Barges Operated |
Dry
Cargo Barges Operated |
|
Kirby
Corporation |
878 |
- |
|
American
Commercial Lines LLC |
379 |
2,861 |
|
Marathon
Ashland Petroleum |
167 |
- |
|
Ingram
Barge Company |
165 |
3,468 |
|
Canal
Barge Company, Inc. |
150 |
226 |
|
Florida
Marine |
103 |
- |
|
American
River Transportation Co |
84 |
1,892 |
|
Blessey
Enterprises |
83 |
- |
|
Higman
Barge Lines, Inc. |
77 |
- |
|
Cenac
Towing Company, Inc. |
69 |
- |
|
Magnolia
Marine Transport Co |
60 |
- |
|
PPG
Industries, Inc. |
59 |
- |
|
Martin
Midstream Partners |
55 |
- |
|
Southern
Towing Company |
53 |
- |
|
Settoon
Towing, LLC |
49 |
- |
|
LeBeouf
Brothers Towing Co |
43 |
- |
|
John W.
Stone Oil |
31 |
- |
|
Dupont |
30 |
- |
|
Olin
Corporation |
26 |
- |
|
Buffalo
Marine Service, Inc. |
22 |
- |
|
River
City Towing Services |
19 |
- |
|
Rhodia,
Inc. |
19 |
- |
|
Lyondell
Chemical Company |
17 |
- |
|
Shipper
Owned
Independent |
Tank
Barges Operated |
Dry
Cargo Barges Operated |
|
Dynegy
Midstream Services |
16 |
- |
|
Waxler
Towing Company, Inc. |
15 |
- |
|
Highland
Towing |
15 |
- |
|
ConocoPhillips
Company |
15 |
- |
|
Plaquemine
Towing Corp. |
13 |
- |
|
Houston
Marine Services, Inc. |
13 |
- |
|
Devall
Towing |
12 |
- |
|
Chem
Carriers, Inc. |
11 |
- |
|
Westlake/GA&O
Corporation |
10 |
- |
|
Merichem
Company |
8 |
- |
|
Grifco |
8 |
- |
|
Apex
Towing |
7 |
- |
|
Golding
Barge Lines, Inc. |
6 |
- |
|
Republic
of Texas |
6 |
- |
|
American
Milling |
5 |
17 |
|
Barge
Management, Inc. |
5 |
- |
|
Mon
River Towing, Inc. |
4 |
142 |
|
Reilly
Industries |
4 |
- |
|
Memphis
Barge Lines |
2 |
- |
|
Cytec
Industries |
2 |
- |
|
Jantran,
Inc. |
1 |
3 |
|
Other
dry cargo carriers |
- |
9,
670 |
|
TOTAL |
2,816 |
18,279 |
Tank
Barge Owners By Number of Tank Barges
Sparks
Companies, March 2005
6
Fleet Size
and Diversity
Total Tank
Barges
2,816
Inland Tank
Barge Industry
|
1,205 |
Double Skin
30K barges |
|
1,292 |
Double Skin
10K barges |
|
124 |
Double Skin
< 10K barges |
|
195 |
Single Skin
barges |
|
2,816 |
Total |
Industry
Fleet Hull Profile
Source:
Sparks Companies, March 2005
Inland Tank
Barge Fleet
|
2005 |
|
2006 |
113
29
Total
Industry
New
Construction on Order
31 Clean
8 Black
Oil
39 Total
7 Clean
8 Black
Oil
15 Total
2005
2006
Kirby New
Construction Plan
|
New
Construction |
23 |
39 |
15 |
6 |
9 |
11 |
18 |
Number of
Barges
Barrel
Capacity (mm)
Kirby Fleet
Status
|
10,000
bbl – Clean |
$1.0M |
|
30,000
bbl – Clean |
$2.1M |
|
30,000
bbl – Heated Black Oil |
$2.7M |
New
Construction Prices
|
Construction
labor |
38% |
|
Steel,
steel products |
37% |
|
Components |
17% |
|
Engineering |
8% |
|
100% |
New
Construction Cost
Components
Components
Logistics
Management System
Logistics
Management System
State-of-the-Art
Communication and Positioning
Kirby Leads
Industry
| • | All equipment locations instantly available to customer |
| – | Current position |
| – | ETA to customer’s dock |
| – | Information available from booking to final invoice |
Logistics
Management
Equipment
Positioning
Equipment
Positioning
Kirby Leads
Industry
| • | All equipment locations instantly available to customers |
| – | Current position |
| – | ETA to customer’s dock |
| – | Information available from booking to final invoice |
Logistics
Management
| • |
Advanced logistics system enables higher equipment utilization and increased efficiency |
| • | Kirby’s
software automatically selects least cost communications route |
| • |
Communication system allows Kirby to effortlessly comply with new security regulations |
Marine
Workforce
| • | Focus on Safety |
| • | Recruit |
| • | Train to be the best |
| • | Retain skilled personnel |
| • | Offer excellent pay and benefits |
| • | Provide advancement opportunity |
| • | Foster community environment |
Recruit,
Train and Retain
Captains /
Pilots
Tankermen
Deckhands /
Tankerman Trainees
Engineers
1,295 Marine
Employees
468
424
307
96
Vessel
Personnel Profile
Average
Years of Service
Captains /
Pilots
Tankermen
Engineers
12
5
13
Vessel
Personnel Profile
| • | Recruit |
| – | Hire the right people |
| – | Provide
opportunity in rural areas with weak job markets |
| – | Comprehensive screening |
| • | Training and Development |
| – | Only
company-owned and operated Training Center in industry |
| – | U.S. Coast Guard-approved programs |
| – | Provide safety and job skill training |
| – | Steersmen
Training Program ensures
lower turnover |
Recruit,
Train and Retain
| • | Retain skilled personnel |
| – | Retain 30% we hire licensed from the outside |
| – | Retain
90% of the personnel we train in our program from deckhand to pilot |
Recruit,
Train and Retain
Deckhand
Tankerman
Steersman
Pilot
Relief
Captain
Captain
Starting
salary
$29,000
As soon as 6
mos.
$31,200 to
$44,300
In 2-3
years
$46,900
In 3-5
years
$71,900
In 5-10
years
$76,500
In 10
years
$82,000* Up
to
$100,000 plus
bonus
$100,000 plus
bonus
Kirby
Offers Excellent Benefits
|
Highly
competitive wages |
401(k) |
|
Insurance |
Disability
coverage |
|
Pension
plan |
Annual
incentive bonus |
|
Free
training |
Longevity
pay* |
|
Paid salary
while training |
Holiday
pay* |
Provide
Advancement
Opportunity
Opportunity
|
2:00 –
2:05 |
Welcome
and Introductions |
|
2:05 –
2:30 |
U.S.
Inland Waterways |
|
2:30 –
3:00 |
Kirby
Overview |
|
3:00 –
3:15 |
Kirby
Inland Marine
· Kirby and Industry Fleet
Profile |
|
3:15 –
3:30 |
Break
15 minutes |
|
3:30 –
3:50 |
Kirby
Engine Systems Overview |
|
3:50 –
4:35 |
Outlook
for the Petrochemical Industry
· Chemical Market Associates,
Inc. |
|
4:35 –
5:20 |
Refined
Products Supply & Demand Drivers
· Purvin & Gertz,
Inc. |
|
5:20 –
5:25 |
Closing
Remarks |
Agenda
Kirby
Analyst/Investor Meeting
The Diesel
Engine
Service Market
Service Market
|
Engine
Speed |
Horsepower
Range |
Applications |
Manufacturers | |
|
Slow
Speed |
Less than 400
RPM |
7,000 – 108,000
hp |
Large
diesel-powered ocean going tankers, cruise ships, container ships and cargo carriers |
Man B&W,
Sulzer, Wartsila |
|
Medium
Speed |
400 – 1,000
RPM |
800 – 32,000
hp |
Locomotives,
inland towing, ocean towing, oil services, harbor towing, fishing, power generation |
EMD,
GE, Caterpillar/MAK, MAN B&W, Colt-Pielstick, Wartsila |
|
High
Speed |
Over 1,000
RPM |
50 – 8,375
hp |
On- and
off-road trucks and equipment, oil services, inland towing, power generation, locomotives |
Caterpillar, Cummins, MTU, Mitsubishi, Volvo, John Deere |
Basic
Diesel Engine Types
Slow Speed
Diesel Engine
Medium
Speed Diesel Engine
High Speed
Diesel Engine
|
No.
of Engines* |
% of
Outstanding Population | |
|
EMD |
4,500 |
39% |
|
Detroit
Diesel |
3,300 |
29% |
|
Caterpillar |
2,400 |
21% |
|
Cummins |
1,200 |
11% |
Marine
Engines
*
Estimated marine engines
What We
Do
| • | Sell new & remanufactured OEM parts |
| – | EMD and Alco medium speed diesel engines |
| – | Caterpillar,
Cummins and Detroit Diesel high speed diesel engines in Midwest market |
| • | Provide skilled labor & specialty services |
| – | Diesel engine repairs, overhauls & rebuilding |
| – | Marine reduction gear repairs & overhauls |
Seattle
Paducah
Houma
Chesapeake
Rocky
Mount
Tampa
Miami
Facility
Locations
2004
Revenue
Rail
21%
Marine
59%
Power
Generation
20%
KES Primary
Markets
Revenue
Sources
| • | Part Sales (51%) |
| – | New parts |
| – | Nuclear parts dedication |
| – | Rebuilt parts |
| • | Services (49%) |
| – | Complete overhauls to OEM specifications |
| – | ABS certified block welding |
| – | In-place machining |
| – | Laser alignment |
| – | Troubleshooting |
| – | Preventive maintenance |
| – | Engine controls modifications |
Top Ten
Customers
| • | America Electric Power (AEP) |
| • | Amtrak |
| • | Crowley |
| • | ENSCO (ESV) |
| • | Exelon (EXC) |
| • | Ingram Barge Company |
| • | Maritrans (TUG) |
| • | Moran Towing |
| • | New Jersey Transit |
| • | Tidewater, Inc. (TDW) |
59% of Total
Revenue
Marine
Markets
Marine
Market Drivers
| • | Market Drivers |
| – | Chemicals,
petrochemicals, fertilizer, black oil, refined products, grain, coal, cement & steel |
| – | General import/export activity |
| • | Containers |
| • | Break bulk |
| – | Exploration and drilling |
21% of Total
Revenue
Rail
Markets
Rail Market
Drivers
| • | Market Drivers |
| – | Commuter demand |
| – | Chemicals,
petrochemicals, fertilizer, black oil, grain, coal, cement, automotive and steel |
| – | Containers |
20% of Total
Revenue
Power
Generation Markets
Power
Generation Market
Drivers
Drivers
| • | Market Drivers |
| – | Increasing electrical demand |
| – | Nuclear license renewals |
| – | Technology upgrades/modifications |
| – | Maintenance outsourcing |
Growth
Opportunities
| • | Organic |
| – | Emissions
Reduction Programs - new services to
existing customers |
| – | Term Maintenance Contracts |
| • | Acquisition |
| – | Competitors |
| • | High Speed Diesel Engine Services |
| – | Engine Populations |
| • | New product lines for existing customers |
| • | New product lines for new customers |
|
2:00 –
2:05 |
Welcome
and Introductions |
|
2:05 –
2:30 |
U.S.
Inland Waterways |
|
2:30 –
3:00 |
Kirby
Overview |
|
3:00 –
3:15 |
Kirby
Inland Marine
· Kirby and Industry Fleet
Profile |
|
3:15 –
3:30 |
Break
15 minutes |
|
3:30 –
3:50 |
Kirby
Engine Systems Overview |
|
3:50 –
4:35 |
Outlook
for the Petrochemical Industry
· Chemical Market Associates,
Inc. |
|
4:35 –
5:20 |
Refined
Products Supply & Demand Drivers
· Purvin & Gertz,
Inc. |
|
5:20 –
5:25 |
Closing
Remarks |
Agenda
Kirby
Analyst/Investor Meeting
Outlook for
Commodity
Chemicals in
the United States
May 19,
2005
Presented
to:
Transportation
Analyst Group
Outline
| • |
40,000 ft
- Global Economic view, petrochemical cycle, new investment |
| • |
10,000 ft–
Changing role of U.S. olefins industry, impact on feedstocks & derivatives |
| • |
River Level–
Bottom line, things are changing, but liquid movements expected to trend higher |
Chemicals
& plastics markets
are in a full revival mode
Economic
recovery firmly
entrenched – especially in
Asia & Americas.
The rate of
new capacity
additions increasing but
remaining measured
Hyper
natural gas & oil markets
maintaining high price levels
Producers
leveraged their position of market strength,
improved profitability regardless of cost changes
improved profitability regardless of cost changes
Current
Global Market Conditions…
Short-term
Outlook Is Somewhat Tempered
Developing world
healthy, Japan and Europe slowing
Geopolitical
Uncertainties & High Energy are a big negative
Services Sector
still very strong. Can China moderate?
Sustained by
Longer-term Supporting Strengths
Monetary and
Fiscal policies imply continuation
Moderately
higher interest rates are still simulative
Banking Systems
supportive and functioning well
International
trade still gaining momentum (WTO)
Global
Expansion Remains Firmly Entrenched
Recovery still
responding to several stimuli
Developed
Country consumption remains strong
The Economic
Outlook
Next Two
Years
Global GDP
Growth Rates
Constant
2000 Dollars
-2
-1
0
1
2
3
4
5
6
7
8
81
83
85
87
89
91
93
95
97
99
01
03
05
07
09
Percent
Change
Global
U.S.
Demand Is
Robust!
Petrochemicals
Health
Care
Household
Goods
Rubber &
Plastics
Transportation
Construction
Food
&
Beverage
Beverage
Textiles
Electronics
Impact of
High Energy Prices
| • |
Economies have underperformed by about 0.75 points |
| • | Extreme volatility |
| • |
Declining energy prices will be supportive of economic growth in 2007 - - 2009 |
Feedstock
Cost: Impacts all Regions
(well, some more than others…)
(well, some more than others…)
| • |
Dramatic Increase in North America with higher natural gas prices |
| • |
Up in West Europe, Latin America & Asia with $50+ per barrel crude oil |
| • |
Middle East remains the lowest |
Middle East
Advantage is All Natural Gas
Based
Based
$7.50/$50
$5.50/$47
$1.00/$45
$4.50
/$49
/$49
Nat Gas
$/MMbtu / Crude Oil
$/bbl
Ratio of
Natural Gas vs. Crude Oil Price in the U.S.
40%
50%
60%
70%
80%
90%
100%
110%
120%
Environmental
emphasis was not offset with sufficient supply incentives
Drilling
(replacement) rates have not maintained pace - steady demand
growth
Market will
produce sufficient supply/demand reaction – at best, back to parity
(Conservation – Demand Switching – LNG Terminals – Northern Gas)
(Conservation – Demand Switching – LNG Terminals – Northern Gas)
Btu basis
using 6 million per bbl for oil
40%
50%
60%
70%
80%
90%
100%
110%
120%
U.S. petchem
industry was built on natural gas - an abundant and low cost
fuel
Current Crude
Oil
Current Nat
Gas
U.S.
Energy
Values
Values
10
15
20
25
30
35
40
45
50
55
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
($ per
barrel)
($ per
mmBtu)
Market
Forces Will Eventually Return Energy
Prices To Fundamental Levels (Greenspan April-05)
Prices To Fundamental Levels (Greenspan April-05)
Rising crude
oil prices impact
chemicals sector earnings
most severely in periods of
oversupply
chemicals sector earnings
most severely in periods of
oversupply
Strong
market conditions
allow producers to pass
through rising costs (and
more), building up margins
allow producers to pass
through rising costs (and
more), building up margins
Cost
push supported price
increases facilitate higher
earnings when cost fall – but
tight conditions must persist
increases facilitate higher
earnings when cost fall – but
tight conditions must persist
Sector
Leverages High Energy Prices...
Basic
Chemicals and Plastics
Annual
Demand Growth
0
5
10
15
20
25
30
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
Million
Metric Tons
Timing
&
Duration
Duration
Ethylene
Glycol
Glycol
There
now or
may not get
there
may not get
there
Remain
above
for several
more years
for several
more years
From a
Re-Investment Perspective
From
a
Historical
Perspective
Historical
Perspective
Lower
than
before
before
Higher
than
previous
peaks
previous
peaks
PET
Resins
Resins
PE
Resins
Resins
PP
Resins
Resins
Ethylene
Propylene
Benzene
ECUs
Methanol
Paraxylene
Styrene
PS
Resins
Resins
PVC
Resins
Resins
Quality
of
the
Earnings
the
Earnings
From a
non-integrated
vantage
vantage
Up Cycle
Peak Earnings Profile
Americas
Europe
Middle
East/Africa
Asia
Pacific
-2
0
2
4
6
8
10
Million
Tons
00
01
02
03
04
05
06
07
08
09
10
Global
Ethylene Capacity Growth
Global
Assembly Line
Commodities
to Converted Products to Retail Goods…
Growth In
Chemicals
Demand Will Continue
To Outpace That Of
The World Economies
Demand Will Continue
To Outpace That Of
The World Economies
Extremely
Efficient
Supply Chains Have
Been Developed -
Internationals and WTO
Very Supportive
Supply Chains Have
Been Developed -
Internationals and WTO
Very Supportive
Improving
Standard Of
Living In China Has
Significantly Increase
Internal Consumption
Living In China Has
Significantly Increase
Internal Consumption
Implies That
Current
Pace Of Additions Can
Be Absorbed As Long As
Restraint Continues
Pace Of Additions Can
Be Absorbed As Long As
Restraint Continues
Hydrocarbon
Value
Labor
Cost
Consumer
Demand
Demand
Largest
Deleterious
Impact on PE
Impact on PE
World
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
99
00
01
02
03
04
05
06
07
08
09
PE 3.6 /
4.9*
Ethylene
Oxide 4.0 / 5.3*
EDC 2.4 /
3.2*
EBZ 3.4 /
4.1*
Others 1.2 /
3.0*
Capacity 3.6
/ 4.8*
Million
Metric Tons
*%AAGR 99-04
/ %AAGR 04-09
Ethylene
Demand Forecast
Total
Demand Growth = 4.4% AAGR 2004-09
0
100
200
300
400
500
600
700
800
00
01
02
03
04
05
06
07
08
09
Dollars Per
Ton
U.S.
Ethane
U.S. Light
Naphtha
WEP
Naphtha
NEA
Naphtha
Global
Ethylene Cash Margins
Ethylene
Margin Outlook Very Positive
U.S.
Producers Respond
by Closing
or Revamping E/PUnits
Feedstock
Required Per Ton of Ethylene
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Ethane
Propane
Butane
Light
Naphtha
Gasoil
Tons
0
0.5
1.0
1.5
2.0
2.5
3.0
Ethane
Propane
Butane
Light
Naphtha
Naphtha
Gasoil
Volume of
Liquid Co-products
per Ton of
Ethylene
Tons
0
5
10
15
20
25
30
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Million
Tons
Ethane/Propane
Naphtha
Gas Oil
Others
Butane
U.S.
Ethylene Production by Feedstock
(trend is
flat to declining)
0
10
20
30
40
50
60
70
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Million
Tons
Naphtha
Gas Oil
Butane
Ethane/Propane
(pipeline)
U.S.
Ethylene Feedstock Requirements
(heavier
feedslate will require increased liquid movements)
Co-Product
Yield
Avg 2.7
million
tons/yr more than
2004 baseline
tons/yr more than
2004 baseline
0
2
4
6
8
10
12
14
16
18
20
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Million
Tons
Propylene
Butadiene
U.S.
Propylene & Butadiene
Domestic
Demand Forecast
Avg 1.0
million
tons/yr more than
2004 baseline
tons/yr more than
2004 baseline
Regional
Refining & Reforming
0
5
10
15
20
25
SAM
ISC/SEA
AFR/MDE
CEP/FSU
NEA
WEP
NAM
Crude
Refining Capacity
Reforming
Capacity
MMBPCD
Sources:
PGI/CMAI
0
5
10
15
20
25
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Million
Tons
Benzene
Styrene
Cumene
Phenol
Cyclohexane
U.S. Benzene
& Derivative
Domestic
Demand Forecast
Avg 500
thousand
tons/yr more than
2004 baseline
tons/yr more than
2004 baseline
0
2
4
6
8
10
12
14
16
18
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Million
Tons
Mixed
Xylene
Paraxylene
Toluene
U.S. Xylene
& Toluene
Domestic
Demand Forecast
Avg 600
thousand
tons/yr more than
2004 baseline
tons/yr more than
2004 baseline
U.S. MTBE
Federal Actions – Will it Pass?
| • |
Federal Ban to pass eventually, but tough negotiation still required. |
| • |
Energy Bill has been stalled in Congress since 2000, high priority for 2005. |
| – | Oxygen
Mandate removed effective 270 days after the bill is signed |
| – | MTBE
banned explicitly beginning 2015, but individual states can override and production for export expressly permitted |
| – | Renewable
Fuels Standard (RFS) in 2007 (?) |
NAM
49.3%
SAM
1.6%
WEP
16.7%
CEP
6.4%
NEA
13.4
%
%
SEA
3.8%
MDE
7.7%
ISC
0.4%
AFR
0.8%
Total Demand
=
16.1 Million Tons
16.1 Million Tons
2004
2009
NAM
26%
SAM
2%
WEP
12%
CEP
12%
NEA
23%
SEA
6%
AFR
1%
MDE
17%
ISC
1%
Total Demand
=
10.8 Million Tons
10.8 Million Tons
Global MTBE
Demand
- adopted ban prior
to 2004
- adopted ban
in/after 2004
-
pending
States with MTBE
Ban
3.1%
States with MTBE
Ban
%
consumption
- adopted ban prior
to 2004
- adopted ban
in/after 2004
-
pending
31.7%
0.8%
1.1%
7.5%
States with MTBE
Ban
%
consumption
- adopted ban prior
to 2004
- adopted ban
in/after 2004
-
pending
States with MTBE
Ban
- adopted ban prior
to 2004
- adopted ban
in/after 2004
-
pending
0
5
10
15
20
25
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Million
Tons
MTBE
Methanol
U.S. MTBE,
Methanol & Ethanol
Domestic
Demand Forecast
Ethanol
Mitigating
Factors Around MTBE
| • | Vast Majority of MTBE moves via pipeline |
| • | States retaining MTBE are in Gulf Coast region |
| • |
MTBE ban requires greater movement of other octane components |
| • |
RFS will ultimately lead to longer mid-west to coast and inter-coastal barge movement of ethanol (all forms of ethanol are prohibited in pipeline system) |
| • |
Japan evaluating large ETBE requirement for Kyoto Agreement that would require several U.S. units to convert |
| • |
Isobutane dehydro units will be retrofitted to iso-octane swapping out MTBE movements |
Conclusions
| • |
Global petrochemical markets are enjoying a significant up-cycle |
| • |
Naphtha/gas oil based ethylene production remains competitive in the industrialized regions |
| • |
U.S. producers have moved towards cracking more liquids that increase both feedstock and co-product volumes and traffic |
| • |
Basic aromatics production is dominated by refinery sources and the U.S. remains the clear leader in supply |
| • |
MTBE reductions will be largely off-set by ethanol opportunities |
|
2:00 –
2:05 |
Welcome
and Introductions |
|
2:05 –
2:30 |
U.S.
Inland Waterways |
|
2:30 –
3:00 |
Kirby
Overview |
|
3:00 –
3:15 |
Kirby
Inland Marine
· Kirby and Industry Fleet
Profile |
|
3:15 –
3:30 |
Break
15 minutes |
|
3:30 –
3:50 |
Kirby
Engine Systems Overview |
|
3:50 –
4:35 |
Outlook
for the Petrochemical Industry
· Chemical Market Associates,
Inc. |
|
4:35 –
5:20 |
Refined
Products Supply & Demand Drivers
· Purvin & Gertz,
Inc. |
|
5:20 –
5:25 |
Closing
Remarks |
Agenda
Kirby
Analyst/Investor Meeting
U.S.
Refining Industry Outlook
Bill
Sanderson
May 19,
2005
Agenda
| Ø | U.S. Economic and Product Demand Outlook |
| Ø | Refining Industry Outlook |
| Ø | Regional Product Movements |
Percent
Annual Growth
Note: GDP
forecast provided by CMAI.
U.S. GDP and
petroleum demand growth are
expected to remain strong short-term . . ..
expected to remain strong short-term . . ..
2005 –
2010
Year-to-Year
Change, Thousand B/D
U.S. refined
product demand is expected to
stay strong through this economic cycle . . ..
stay strong through this economic cycle . . ..
Will
gasoline demand growth slow down
longer term?
longer term?
| Ø |
Higher prices are beginning to affect consumer choices |
| § | Large SUV sales are beginning to fall |
| § | Hybrid sales are beginning to gain acceptance |
| Ø |
In our view, policy and market factors are likely to increase vehicle efficiency after 2010 |
| Ø |
Greenhouse Gas control may eventually become a U.S. regulatory goal, but not yet |
Note:
Average U.S. new car efficiency
Miles
per Gallon
Technology,
policy and market factors expected
to increase new vehicle efficiency long-term ...
to increase new vehicle efficiency long-term ...
Five-Year
Demand Change (Millions of B/D)
Gasoline
demand to stay strong through 2010.
Diesel/jet fuel demand will remain strong . . .
Diesel/jet fuel demand will remain strong . . .
MTBE
Ban
(Cal.
and
NY)
Low
Sulfur
Diesel
(15
ppm)
Low
Sulfur
Gasoline
(30
ppm)
(Tier
2)
Carbon taxes
or
emissions
controls?
2000-2006
2006-2010
Regulatory
changes will continue to strongly
influence U.S. refining and distribution . .. .
influence U.S. refining and distribution . .. .
Renewable
Fuel Requirements
MTBE
Phaseouts
Increasing
Vehicle Efficiency
Zero-sulfur
fuels?
2010
+
Gasoline
quality will continue improving . . .
| Ø | Sulfur is being reduced to 30 ppm |
| § | Sulfur poisons automobile emissions catalysts |
| § | Sulfur reductions provide … |
| • | Immediate emissions reduction impact on entire fleet |
| • | NOx trap capability |
| Ø | MTBE and Ethanol use will change |
| § | Nationwide
MTBE ban expected, with many states moving more quickly |
| § | RFG oxygen mandate expected to disappear |
| § | Renewable mandate expected to boost ethanol |
| § | Current Energy Bill contains all these elements |
Both
programs will affect the refining and
distribution industries . . ..
distribution industries . . ..
Gasoline
Supply and Cost Impacts
Diesel
Supply and Cost Impacts
| Ø | Upgrading of existing desulfurization capacity most common |
| Ø | May tighten international low-sulfur markets |
| Ø | Distribution, contamination issues remain unresolved |
| Ø | Recovery of ULSD costs of 5.0-6.0 cpg (vs 0.2%) expected |
| Ø | Refining investment to offset octane loss |
| Ø | Potential import reductions from non-complying suppliers |
| Ø | Increased domestic gasoline trade |
| Ø | Reduction in finished product distribution flexibility |
| Ø |
Strong U.S. petroleum demand growth should continue through 2010 |
| Ø |
Vehicle efficiency gains expected to reduce growth after the turn of the decade |
| Ø | Diesel growth will be stronger than gasoline |
| Ø |
Refining capacity should remain tight for several years, due to investment lag times and focus on clean fuels compliance |
| Ø |
Strong demand for U.S. product trade expected to continue in the near-term |
Supply/Demand
Conclusions
Agenda
| Ø | U.S. Economic and Product Demand Outlook |
| Ø | Refining Industry Outlook |
| Ø | Regional Product Movements |
U.S.
Refinery Utilization of Operating Capacity, %
Maximum
Sustainable Capacity
Annual
Average
Note: Figures
are distillation capacity utilization for operating
refineries.
U.S.
refinery utilization has been operating at
or near capacity since the late 1990s . . .
or near capacity since the late 1990s . . .
U.S.
Crude Supplies by Source – Million B/D
Growth in
crude oil supplies will be sourced by
offshore imports and Canadian supplies .. . .
offshore imports and Canadian supplies .. . .
V
IV
III
II
I
The U.S.
market is divided into five Petroleum
Administration for Defense Districts (PADDs) . . .
Administration for Defense Districts (PADDs) . . .
PADD III
includes the U.S. Gulf Coast which is
the largest refining region in the U.S. .. . .
the largest refining region in the U.S. .. . .
740
2,270
1,770
2,130
Total PADD
III Distillation Capacity = 8.2 Million B/D
590
Note: Figures
are distillation capacity for operating refineries in ‘000
B/D.
570
120
Crude
Runs by Region - Million Barrels per Day
The Gulf
Coast (PADD III) is the largest refining
region, at roughly 50% of the U.S. total . . .
region, at roughly 50% of the U.S. total . . .
Gulf
Coast Crude Oil Runs by Source, Million B/D
Gulf Coast
(PADD III) crude runs will continue to
become heavier, driving refining investment ...
become heavier, driving refining investment ...
Midcontinent
Upper
Midwest
Midwest
PADD II
includes a number of sub-regions
comprised of smaller, local refining centers .. . .
comprised of smaller, local refining centers .. . .
Note: Figures
are distillation capacity for operating refineries in ‘000
B/D.
Total PADD II
Distillation Capacity = 3.6 Million B/D
400
420
870
500
600
300
490
Midwest
Crude Oil Runs, Million B/D
Midwest
(PADD II) crude supply balance
reflects growth of Canadian production . . ..
reflects growth of Canadian production . . ..
Midwest
Crude Oil Runs, Million B/D
Midwest
crude runs become heavier requiring
conversion capacity investment . . ..
conversion capacity investment . . ..
U.S.
Refinery Distillation Capacity Changes
Thousand
B/D of Capacity (Announced projects, excludes
creep)
Million
Barrels per Day
U.S.
gasoline imports are expected to increase
until demand begins to slow late in decade . . .
until demand begins to slow late in decade . . .
Forecast
in Constant 2005 Dollars per Barrel
Comparable
Gulf Coast and Midwest margins
track relatively well due to market factors . .. .
track relatively well due to market factors . .. .
Agenda
| Ø | U.S. Economic and Product Demand Outlook |
| Ø | Refining Industry Outlook |
| Ø | Regional Refined Product Movements |
Refinery
Refining
Centers
Refined
product pipelines help integrate the
U.S. market . . .
U.S. market . . .
Refined Product
Transportation
Routes
Routes
Refinery
Refining
Centers
But the
inland waterway system remains
crucial in supplying certain markets . . ..
crucial in supplying certain markets . . ..
Inland
Waterways
About 65% of
PADD III products move to
consumers in PADDS I and II . . ..
consumers in PADDS I and II . . ..
PADD III
Production
Major
Light Products - Million B/D
Note: Major
light products include gasoline, jet fuel and diesel
fuels.
PADD II
depends on PADD III for over 20% of
the total light product supply . . ..
the total light product supply . . ..
Major
Light Products - Million B/D
PADD II
Consumption
Note: Major
light products include gasoline, jet fuel and diesel
fuels.
PADD II
receives large volumes of all light
refined products from PADD III . . ..
refined products from PADD III . . ..
PADD II
Net Receipts - Million B/D
Most light
products move to PADD II by
pipeline . . .
pipeline . . .
Thousand
B/D
Note: Product
movements from PADD III to PADD II in
2004.
Thousand
B/D
Waterborne
commerce between PADD III and
PADD II has increased steadily . . ..
PADD II has increased steadily . . ..
Note:
Waterborne product movements from PADD III to PADD
II.
Thousand
B/D
Movements
from PADD III are primarily light
products . . ..
products . . ..
Note:
Waterborne product movements from PADD II to PADD
III.
Thousand
B/D
PADD II
generally moves out surplus heavy
products by water, some light products move .. . .
products by water, some light products move .. . .
Thousand
B/D
Note:
Waterborne movements from PADD II to PADD III. Figures for
2004
are estimated.
Waterborne
light product movements from
PADD III to PADD II are projected to grow . . ..
PADD III to PADD II are projected to grow . . ..
Note:
Waterborne movements from PADD II to PADD III. Figures for
2004
are estimated.
Thousand
B/D
PADD II will
remain in surplus for residual fuel
and asphalt . . ..
and asphalt . . ..
Conclusions
| Ø |
Continued demand growth in PADD II will require additional movements to markets served by the inland waterway system |
| Ø |
Growing heavy crude processing in PADD II will increase the local surplus of asphalt and residual fuel |
This
analysis has been prepared for the sole benefit of Kirby Corporation. Neither
the analysis nor any part of the analysis shall be provided to third parties
without the written consent of Purvin & Gertz. Any third party in possession
of the analysis may not rely upon its conclusions without the written consent of
Purvin & Gertz. Possession of the analysis does not carry with it the right
of publication.
Purvin
& Gertz conducted this analysis utilizing reasonable care and skill in
applying methods of analysis consistent with normal industry practice. All
results are based on information available at the time of review. Changes in
factors upon which the review is based could affect the results. Forecasts are
inherently uncertain because of events or combinations of events that cannot
reasonably be foreseen including the actions of government, individuals, third
parties and competitors. NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE SHALL APPLY.
Some
of the information on which this analysis is based has been provided by
others. Purvin & Gertz has utilized such information without
verification unless specifically noted otherwise. Purvin & Gertz
accepts no liability for errors or inaccuracies in information provided by
others.
Terms and
Conditions
U.S.
Refining Industry Outlook
Bill
Sanderson
May 19,
2005
|
2:00 –
2:05 |
Welcome
and Introductions |
|
2:05 –
2:30 |
U.S.
Inland Waterways |
|
2:30 –
3:00 |
Kirby
Overview |
|
3:00 –
3:15 |
Kirby
Inland Marine
· Kirby and Industry Fleet
Profile |
|
3:15 –
3:30 |
Break
15 minutes |
|
3:30 –
3:50 |
Kirby
Engine Systems Overview |
|
3:50 –
4:35 |
Outlook
for the Petrochemical Industry
· Chemical Market Associates,
Inc. |
|
4:35 –
5:20 |
Refined
Products Supply & Demand Drivers
· Purvin & Gertz,
Inc. |
|
5:20 –
5:25 |
Closing
Remarks |
Agenda
Kirby
Analyst/Investor Meeting
| • | Fundamentals have not been this good in 25 years |
| • |
Business will continue to consolidate. Kirby is best positioned company to be the consolidator. |
| • | Strong free cash flow |
| • | Great operating leverage |
| • |
Age profile of fleet provides hedge against over building |
| • | Best transportation franchise around |
Why is
Kirby a Good
Investment?
Investment?